Does cheap liquor encourage excess?
Wednesday, February 3, 2010
The Low Cost of Drinking
Does cheap liquor encourage excess?
Last year, Sir Liam Donaldson, the Chief Medical Officer in England, touched off a storm of controversy with his call for a government-mandated minimum pricing schedule for the sale of alcohol.
Donaldson’s pricing plan would set a minimum of 50p per unit of alcohol, or roughly 80 cents. This floor on alcohol pricing would mean that a bottle of wine could not be sold for less than $7.20, a bottle of whisky for less than $22, or a six-pack for less than about $9.50. Such a measure would effectively double the price of the cheapest alcohol sold in some discount supermarkets. Sir Liam Donaldson and other health officials have pointed out that, while alcohol consumption in many European countries has fallen since 1970, consumption in England has increased by 40%.
Sir Liam estimated that the pricing minimums would save more than 3,000 lives and result in 100,000 fewer hospital admissions per year.
Further roiling the waters was a London Times article in December titled “Alcohol now costs less than water.” The Times found that cut-price deals at British supermarkets were endemic. Don Shenker, chief executive of Alcohol Concern, said that supermarket discounting was undermining the government’s efforts to curb binge drinking in the UK: “The evidence shows young people and harmful drinkers are drawn to very cheap alcohol.” The British Medical Association also threw its support behind a crackdown on deeply discounted alcohol sales.
However, Prime Minister Brown announced his government’s opposition to minimum pricing, arguing that the proposal would penalize the majority of sensible drinkers due to the actions of a few. It was also suggested that the measure might be illegal under EU competition laws.
As it turned out, alcohol was only cheaper than water if you bought the most expensive water and the least expensive booze. But no matter—the point had been made. “We have a huge problem with alcohol abuse in the UK,” said a spokesperson for the British Medical Association, “so we want a clampdown on these cut-throat price deals.”
Scotland also announced it was considering a minimum pricing plan. However, a study by Deloitte Research, reported in the Herald Scotland, found that only one out of five adults would be likely to buy less alcohol under a minimum price system. 52% said they would spend more money for the same amount of alcohol or else seek out cheaper brands. In addition, the Deloitte research suggested that people use cheap supermarket alcohol for “pre-fueling” or “pre-loading” before going out for the night. Scotland’s alcohol intake per person is higher than Britain’s. Recently, the Scottish government released a report from the University of York, which estimated that alcohol abuse cost Scottish taxpayers almost $7.5 billion a year.
British Health Secretary Andy Burnham told the UK Telegraph that while he did not wish to “punish the majority of people who drink responsibly,” he maintained there was no argument about “the link with price and people drinking harmful levels of alcohol—there is no debate about that.” Government officials note that the imposition of some form of levy might be required to keep the drinks industry from reaping windfall profits from a price increase. To date, the British Cabinet has taken no formal action on the matter.
Starting in April, British pubs and clubs will be banned from running “all you can drink” nights and other “irresponsible drink promotions,” according to The Independent. The plans have met with stiff opposition from pub owners, the alcohol industry, and the public.
All of this may be in vain: The demand for alcohol, in economic terms, may be highly inelastic, like the demand for cigarettes and coffee. Price hikes for those two items over the years have not been accompanied by similar declines in usage.
Photo Credit: www.design4retail.co.uk